Gainesville City Council members agreed Thursday to issue a bond that will allow them to purchase the Hall County Jail on Main Street with a 2.5 percent interest rate.

The $7.2 million debt is expected to be repaid using lease payments from Corrections Corp. of America, a private jail firm that houses detainees for Immigration and Customs Enforcement, over the next seven years.

The bond council members agreed to sell to Robert W. Baird & Co. Inc. will come with a 2.5 percent interest rate, which is lower than city officials originally projected.

Originally, city officials agreed to pursue a bond debt with an interest rate of no more than 4 percent.

They also had hoped to have an opportunity to call the bond in five years in case CCA terminated its lease early.

But Gainesville’s Administrative Services Director Melody Marlowe said Thursday the early call date was too expensive.

The bond is not tax-exempt, because the city is leasing the property to a private for-profit company and therefore comes at a higher interest rate.

Another tax-exempt bond the city issued to refinance previous debt Thursday came with a 0.99 percent interest rate.

Originally, city officials had expected at least 2.25 to 2.5 percent.

The lower-than-expected interest rates were likely due to a recent bond rating given to the city by Moody’s of AA2, according to Dianne McNabb, the director of Public Financial Management Inc., who consulted for the city on the financing.

McNabb said the rating was “extremely high,” adding that S&P assigned the city a “positive outlook,” meaning the city’s bond rating with that firm likely will be upgraded.

“It’s obvious how favorable the city of Gainesville is viewed,” McNabb said.

Gainesville is taking on the jail debt with the expectation that CCA will operate in the facility for the next seven years.

The risk allows city officials to take control of the destiny of the property as they seek to redevelop the midtown area.

Hall County agreed to sell the jail property to Gainesville in June after months of negotiating with the city and CCA. Under the new deal, CCA, which previously leased from the county, will continue to lease the facility from the city, operating it as the North Georgia Detention Center. Hall County Sheriff’s Office administration, also located in the building, will remain there until 2017.